Bundling and joint marketing by rival firms

Thomas Jeitschko, Yeonjei Jung and Jaesoo Kim ()

No 144, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We study joint marketing arrangements by competing firms who engage in price discrimination between consumers who patronize only one firm (single purchasing) and those who purchase from both competitors (bundle purchasers). Two types of joint marketing are considered. Firms either commit to a component-price that applies to bundle-purchasers and then firms set stand-alone prices for single purchasers; or firms commit to a rebate off their stand alone price that will be applied to bundle-purchasers, and then firms set their stand alone prices. Both methods allow firms to raise prices and earn higher profits. However, the effect of price discrimination on social welfare depends on how prices are chosen. The rebate joint marketing scheme increases joint purchasing, whereas bundle pricing diminishes bundle purchases. If the marginal social value of a bundle over a single purchase is large, the former increases total welfare. However, welfare can also increase with bundle pricing compared to non-discriminatory pricing.

Keywords: Bundling; Joint Marketing; Price Discrimination (search for similar items in EconPapers)
JEL-codes: D4 D8 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Journal Article: Bundling and joint marketing by rival firms (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:144

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